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Kate Linebaugh: Earlier this summer, our colleague, Eric Morath, and his editors began planning a story about the comeback of the US economy, which they thought was going to happen around Labor Day.
Eric Morath: We had just got that June jobs report that showed a million jobs added. And we thought, wow, the economy really seems like it’s picking up steam here. A lot of businesses were like, yeah, Labor Day, that’s when we’re going to make changes. So we thought, man, we’re just a couple of months away from this thing really taking off.
Kate Linebaugh: But in July, as Eric was reporting out this story, he was getting a different message.
Eric Morath: When I was talking to people, they were like, “Yeah, I’m kind of skeptical about this. I’m uncomfortable going on the record for this story yet. Why don’t you give me a call back in two or three weeks?”
Kate Linebaugh: When Eric called those people back, they were no longer predicting a recovery.
Eric Morath: I went to my editors and I was like, “Yeah, that story’s dead in the water.”
Kate Linebaugh: Instead, Eric’s been doing stories about how that economic rebound is faltering. Plans for conferences, reopenings, concerts, are all being delayed.
Eric Morath: Music acts like Garth Brooks, Florida Georgia Line, Nine Inch Nails, Stevie Nicks, they’d all had concerts planned. The new Top Gun movie was slated to come out this fall. And other releases and all those things were canceled or delayed, in most cases, until 2022.
Kate Linebaugh: Welcome to The Journal. Our show about money, business, and power. I’m Kate Linebaugh. It’s Thursday, September 9th. Coming up on the show, the dashed hopes of a quick economic recovery.
The economic data coming out this spring fueled hope that the US economy was set for a swift rebound. Consumer confidence was high, people were spending money again, and jobs were coming back.
Eric Morath: And so that was a really positive moment for the economy. And that raised expectations that we could get very near a full recovery of the 22 million jobs we lost in March and April of 2020, perhaps by the end of this year.
Kate Linebaugh: And so there was this burst of optimism.
Eric Morath: Absolutely. Yeah. New York and California were two states that had significant restrictions on economic activity, or limiting the number of people that could be in a dining room, for example. Those all fell off in June. Baseball stadiums were at full capacity. Theme parks were open. We were ready for our exciting post COVID summer.
There was just a lot of optimism that this momentum that started to build early in the summer was going to grow into the fall, because Americans had a lot of pent up demand.
Kate Linebaugh: People wanted to get out and be in the world again. And many of them had money to do it.
Eric Morath: We have savings. Those that were fortunate enough to keep their jobs through the pandemic didn’t spend a lot of money on new clothes or traveling, go dining out. So they had money. And then we have all the stimulus sloshing around the economy. And people’s savings rates have risen during the pandemic and they seemed poised and ready to spend this fall.
Kate Linebaugh: But then …
Speaker 3: The Delta variant is changing the game.
Speaker 4: That Delta variant surging, ICU beds dwindling in hard hit areas across the south.
Speaker 5: With mounting concern over the highly contagious Delta variant, Los Angeles County now urging it’s 10 million residents to once again wear masks in indoor public spaces, vaccinated or not.
Kate Linebaugh: The Delta variant is about twice as contagious as other COVID strains. And it’s driven up infections and hospitalizations around the country, and caused businesses to pause their reopening plans. So by early August, economists started doubting their rosy predictions for the fall.
Eric Morath: When I was asking them about their near-term outlook, they said, I’m not nearly as optimistic as I was a month ago about telling you that we’re going to continue to churn out 900,000 to a million jobs a month. I’m starting to see some evidence that consumers are being a little more cautious and that businesses are just going to be a little bit more reluctant to add that next person. Not that they’re going to cut and lay people off again, like they did in the spring of 2020. But maybe, I’m not quite as busy as I was, so I’m not going to hire that additional server. I’m not going to hire that next person at the cash register.
Kate Linebaugh: So they’re kind of tapping the brakes?
Eric Morath: Yeah, exactly. Sort of tapping the brakes.
Kate Linebaugh: And how has this slowdown shown up in economic indicators?
Eric Morath: We certainly saw that in the most recent jobs report. We saw hiring slow to just around 250,000 jobs added last month from a million each the previous two months. And it was really important where that change happened. We saw restaurants adding hundreds of thousands of jobs a month, month after month, all this year. And in August, they cut 40,000 jobs. We saw construction sites cut jobs. We saw retailers cut jobs. Those are all jobs that have to be done in person.
A lot of them are jobs that are contingent on other people having demand. Other people expecting they’re going to go back to the office and need childcare. And now we saw these childcare centers … just a couple months ago, no one can find childcare workers. It’s this huge crisis. And now suddenly, centers are cutting a few thousand jobs in August. That just shows how dramatic of a turn we had in this economy.
Kate Linebaugh: How are you seeing that play out specifically?
Eric Morath: So I spoke to this guy named Greg Greeson. He owns a furniture store in Austin called Collectic Home. And they had everything thrown at them in the pandemic, but things kind of started to stabilize and he was seeing renewed demand. A lot of people have bought new homes or want to improve their homes, and they were buying furniture. And he was selling a lot of furniture online and selling furniture to folks there in Austin.
Kate Linebaugh: But then last month, Greeson experienced an ominous moment that would signal a change in his fortunes.
Eric Morath: He said it was a Saturday and he had some customers in the store, and things were looking pretty busy. And then their phones started blaring. And I don’t know if you’ve ever got like a tornado warning or a flash flood warning on your phone. Well, he said in Austin, it’s set up where they could put out a COVID warning.
And they put out a warning that said even vaccinated people should be wearing masks and limiting unnecessary shopping trips. And buying high-end furniture is probably an unnecessary shopping trip. Right there, his customers were kind of like, freaked out.
Kate Linebaugh: And it started to become very clear to Greeson that the Delta variant was going to hurt his business’s recovery.
Eric Morath: He said in the last two weeks, traffic has slowed down. He’s seen people less willing to make these big investments in new furniture, and less people visiting to the store. So he doesn’t know how long that’ll last, but he knows for now it’s cutting into his profit margins.
He thought he saw the light at the end of the tunnel. And then it turned out to be a freight train coming at him in the form of the Delta variant.
Kate Linebaugh: That freight train was headed for more than Greeson’s store in Austin. That’s after the break.
How broadly is the Delta variant hitting the overall economy?
Eric Morath: It’s hitting every part of the economy, and it’s hitting every state. And so we’re going to see that ripple throughout the whole country. We thought the economy was going to find its new stride. Its post COVID, its post stimulus stride, and that’s just not happening this fall in the way economists thought. And many people. CEOs thought, economists thought, journalists…